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This paper aims to investigate auditors’ pricing of excess cash holdings and the variation in their pricing decisions in light of the precautionary motives of cash holdings and certain firm-specific conditions and during periods of crisis.

The authors conduct the two-stage-least-squares multivariate analysis using a sample of publicly listed non-financial US firms for the period 2003 to 2021 (42,413 firm-year observations).

The findings show a significant positive relationship between excess cash and audit fee. Next, the authors find that audit pricing of excess cash is significantly higher for firms with lower financial constraints. However, the authors do not find evidence to suggest that auditors price excess cash significantly higher for firms with lower hedging needs. In additional analysis, the authors find evidence to suggest that auditors charge significantly less for excess cash in firms that report financial loss and firms operating in industries with high litigation risk. The additional analysis also reveals excess cash is not positively and significantly priced by auditors as a result of the global financial crisis and Covid-19 pandemic.

Most researchers have analyzed excess cash holding from the perspective of managers, i.e. agency conflict or managerial prudence, while somewhat neglecting auditors’ perception of the embedded risk of excess cash holdings. The authors provide new insights on auditors’ perspective of excess cash holding and identify certain factors/situation/conditions that cause variation in the audit fee premium. The findings offer useful insights for managers and shareholders who are interested in assessing the effects of excess cash holdings policies on the audit fee premium.

This paper aims to examine the impact of gender diversity on boards and on top management positions on excess cash holdings.

The authors adopt the quantile regression approach to test the relation between gender diversity and excess cash holding. The sample consists of 1,235 firm-year observations for the period 2005–2017.

The authors find that board gender diversity negatively influences the level of excess cash. This result suggests that women appointed in the boardroom are effective in monitoring managerial actions, including financing policies. The results also show that by forcing companies to have a quota of women on their boards, the presence of women no longer has a negative impact on excess cash holdings. However, when women stand at the chief executive officer or chief financial officer position, they tend to accumulate cash for precautionary motives. These results suggest that women behave differently regarding excess cash holding as monitors compared to their role as decision-makers.

The results may be of interest to legislators who may decide to break the glass ceiling, preventing women from gaining greater access to senior management positions. This is in line with the recommendations of the AFEP-MEDEF Governance Code of 2020, which strongly recommends the recruitment of women to senior management positions. The results are also important to investors, who might be likely to trust companies in which women hold positions on boards of directors which may increase firm value. The results may also have a social impact. Indeed, the role of women in society may be enhanced if such initiatives are taken to increase their representation on leadership positions and in society in general.

The results may also have a social impact. Indeed, the role of women in society may be enhanced if such initiatives are taken to increase their representation on leadership positions and in society in general.

This study investigates the role of women both as controllers and decision-makers in holding excessive amounts of cash. It also highlights new evidence on the impact the approach of appointing women on boards (enabling/coercive and market-based) can have on the relation between gender diversity and excess cash holdings.

The purpose of this paper is to investigate the relationship between corporate debt-like compensation and the value of excess cash holdings.

The sample comprises 876 US firms covered by ExecuComp over the period 2006-2013. The authors apply the valuation regression of Fama and French (1998) to examine the marginal value of excess cash as a function of CEO inside debt holdings.

This paper proposes one hypothesis. The results constitute evidence that the value of excess cash to shareholders declines as CEO inside debt increases. More interestingly, excess cash holdings contribute less to firm value when shareholders expect their value to be destroyed due to managers’ conservative behavior.

The sample comprises only US firms, owing to a lack of firms data from other countries. It would be interesting to conduct future research on an international sample.

This paper contributes to a deeper understanding of investor valuation of excess cash in the presence of CEO inside debt. The findings complement previous studies on US firms by confirming the existence of a relationship between the agency costs of debt and firm policy decisions.

This work is, to the best of the authors’ knowledge, the first to examine the relationship between debt-like compensation and excess cash valuation, and it supports the view that the conflict between shareholders and debtholders largely affects firm cash policy, and hence, cash valuation.

This study conducts a logistic regression analysis of the ability of excess cash and short-term bank loans to substitute for each other and a multiple regression analysis of the factors influencing excess cash and short-term bank loans holdings. In addition, a questionnaire is used to survey the views of Taiwan’s corporate financial leaders on the factors influencing these two liquidity resources. The empirical results support a certain level of substitution between the two types of holdings. The regression analysis shows that for companies that would accumulate more excess cash when interest rates are low, have strong corporate performance, have low debt ratios, and whose chairman of the board and chief executive officer (CEO) are not the same person. Companies tend to have more short-term bank loans when corporate performance is poor, debt ratios are high, and the chairman of the board and CEO are the same person, as well as when the degree of the deviation of control is small. We find that factors on financial structure, operating performance, cost of capital and corporate governance have significant influence on the holdings of these two liquidity facilities in regression, whereas the influence factors exclude corporate governance in questionnaire.

The aim of this paper is to investigate the dynamics between executive ownership and excess cash policy in the UK.

The authors identify firms adopting an excess policy using a joint criterion of high cash and cash higher than the target. Logit analysis is used to estimate the impact of executive ownership and other governance characteristics on the probability of adopting an excess cash policy.

The results suggest that, in the UK, the impact of the executive ownership on the probability of adopting an excess cash policy is non-monotonic, in line with the alignment-entrenchment hypothesis. The results are robust to different definitions of excess cash policy, to alternative specifications of the regression model, to different estimation frameworks and to alternative proxies of ownership concentration.

The authors’ approach provides a new measure of the excess target cash for the firm. They show the need to identify an excess target cash policy not only by using an empirical criterion and a theoretical target level of cash, but also by capturing persistence in deviation from the target cash level. The authors’ measure of excess target cash calls into questions findings from previous studies. The authors’ approach can be used to explore whether excess cash holdings of UK firms and the impact of managerial ownership have changed from before the crisis to after the crisis.

The authors’ measure of excess target cash allows identifying in practice levels of cash which are abnormal with respect to an equilibrium level. UK firms should be cautious in using executive ownership as a corporate governance mechanism, as this may generate suboptimal cash holdings and suboptimal firm value. Excess cash policy might be driven not only by a poor corporate governance system, but also by the interplay between agency costs of managerial opportunism and cost of the external finance which further research could explore.

Actually, “how much cash is too much” is a question that has not been addressed by the literature. The authors address this question. Also, this amount of cash allows the authors to study the extent to which executive ownership contributes to explain the out-of-equilibrium persistency in the cash level.

This study examines the effects of foreign and domestic institutional investors on the value of excess cash holdings in the context of Pakistan where the institutional setting is broadly considered as non-friendly to outside shareholders due to family control.

A panel sample of 220 listed firms on the Pakistan Stock Exchange (PSX) was employed over the period 2007–2018. Data on institutional ownership are collected from the Standard & Poor’s (S&P) Capital IQ Public Ownership database, while the financial data are collected from Compustat Global. The study uses ordinary least squares (OLS) regression with year and firm fixed effects as the main econometric specification. Moreover, the application of models with alternative measures, high-dimensional fixed effects and two-stage least squares (2SLS) regression are also conducted for robustness.

Robust evidence was found that unlike domestic institutional investors, which do not influence the value of excess cash holdings, foreign institutional investors positively affect the contribution of excess cash holdings to firm value. The positive effect on excess cash holdings' value is mainly driven by foreign institutions domiciled in countries with strong governance and high investor protection. Moreover, this effect is stronger in firms that are less likely to have financial constraints.

This study provides novel evidence on the effect of institutional investors on the value of excess cash holdings in an emerging market like Pakistan. It also adds to the literature by revealing that the effect of different groups of institutional investors on the value of excess cash holdings is not homogenous.

The purpose of this study is to determine whether the incremental difference between the actual level of cash from the optimal amount (excess and insufficient cash) to the abnormal amount of cash (abnormal positive and negative changes in cash) leads to an increase in audit fees.

To investigate the main purpose of this study, first, the authors, respectively, estimate the optimal cash flow and the normal (optimal) changes in cash by Oler and Picconi (2014) and Bates, Kahle and Stulz (2009) models for each period. In this regard, financial information of 116 companies listed on the Tehran Stock Exchange is selected during the period 2011-2016.

The results of this investigation indicate that holding an excessive amount of cash than optimal size and audit fees are negatively associated. Moreover, it is documented that abnormal changes in cash flow and audit fees are not significantly associated.

The outcomes of the current study contribute to providing an accurate estimation to determine audit fees in emerging markets.

This article analyzes the moderating role of investment opportunities, business risk and agency costs in shaping the nexus between excess cash and corporate performance.

This research uses dynamic regression models (two-step system generalized method of moments) to analyze the data related to 200 Turkish companies listed on Borsa Istanbul (BIST) for the years between 2009 and 2020.

The findings indicate that when excess cash increases, the financial performance deteriorates only for firms with lower investments compared to firms with more investments. In addition, investment contributes to better financial performance for firms that hold cash surplus, whereas the influence of investment is insignificant for firms that have insufficient cash. Agency costs of equity exacerbate the adverse impact of excess cash on financial performance while agency costs of debt mitigate this effect. Excess cash reduces the financial performance of highly leveraged firms. However, this impact becomes insignificant when debt ratio decreases. The findings also show that investment has more significant role than business risk in building the precautionary motive to hold cash.

The findings of this article are limited to the Turkish market. Future research is still needed in other emerging markets to compare the results and reveal more about the effect of excess cash on firm performance, and how other factors can change this effect.

The findings verify the increased significance of excess cash in the presence of investment opportunities and difficulties in accessing external funds. Nevertheless, the role of the equity related agency problem in reducing the benefits of cash surplus confirms the necessity of policies that support corporate governance, especially in emerging markets.

This article, according to the knowledge of author, is the first to examine the role of agency costs associated with debt and equity, and the compound effect of investment opportunities and business risk on the nexus between excess internal funds and corporate financial performance in emerging markets.

The chapter investigates three channels through which private benefits are hypothesized to be extracted in dual class companies: excess executive compensation, excess capital expenditures and excess cash holdings.

With a propensity score matched sample of S&P 1500 dual class and single class companies with concentrated control, the chapter analyzes the relationship between the valuation discount of dual class companies and measures of excess executive compensation, excess capital expenditure and excess cash holdings.

Executives in dual class firms earn greater compensation relative to their counterparts in single class firms. This excess compensation is more pronounced when the executive is a family member. The value of dual class shares is discounted most when cash holdings and executive compensation of dual class are excessive. Excess compensation is highest for executives who are family members of dual class companies. The dual class discount is not related to excess capital expenditures.

The research shows that the discount in the value of dual class shares in relation to the value of closely controlled single class company shares is directly related to the channels through which controlling shareholder-managers can extract private benefits.

Using a comprehensive sample from developed and emerging economies, this study aims to examine whether foreign institutional investors (FIIs) enhance the value of excess cash by constraining the potential self-appropriating managerial propensity related to its inefficient utilization.

This study uses a large panel data set of firms from 32 non-US countries from 2007 to 2018. Using data from COMPUSTAT Global and S&P Capital IQ, this study uses ordinary least squares regression with year- and firm-fixed effects for the baseline analysis. In addition, two-stage least squares with instrumental variable regression and propensity score matching approaches were used to address the potential endogeneity.

This study shows that FIIs significantly increase the value of excess cash holdings. The authors also found that the positive impact of FIIs is more significant when investors come from common-law countries with better governance and investor protection. Furthermore, in countries and firms with weaker governance controls, the relationship between FIIs and the value of excess cash is stronger, consistent with the institutional monitoring hypothesis. Collectively, the findings imply that FIIs are advantageous to investees because they effectively promote the efficient deployment of corporate resources.

Collectively, the findings of this study imply that FIIs are advantageous to investees because they effectively promote the efficient deployment of corporate resources.

This study offers new evidence on how FIIs impact the value of excess cash in an international setting. In addition, it highlights the significance of the legal origin of institutional investors’ home country and the governance quality of host countries and investee firms in influencing the effect of foreign institutional monitoring on the value of excess cash.